Description

Abstract: Market integration occurs when product flows between markets are on the same terms and conditions as within markets. A highly integrated commodity market is likely to increase market efficiency through efficient resource allocation and price transmission, which is likely to lower transaction costs and increase incomes to actors. Price data collected by the Livestock Information Network and Knowledge System (LINKS) project of the Global Livestock Collaborative Research Support Program led by Texas A & M University were used to assess the degree of livestock market integration by testing whether livestock prices in Nairobi and pastoral areas of Garissa and Isiolo are cointegrated or move together. Data from livestock traders’ survey done in Nairobi and Garissa were also used to examine market characteristics. Key findings indicate that all the three livestock markets exhibit non-stationarity (statistical parameters are dependent on time) and integration of order one and that, whenever there is shock to the price in one market it will be manifested in the other market as well.